Wrap Text
Unaudited interim results for the six months ended 31 October 2013
Ellies Holdings Limited
Registration number: 2007/007084/06
JSE share code: ELI
ISIN: ZAE000103081
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 OCTOBER 2013
Revenue down 3,8%
PAT down 40,9%
EPS of 25,27 cents down 40,7%
HEPS of 25,09 cents down 40,9%
NAV per share of 341,31 cents up 20,1%
Abridged consolidated statement of financial position
Unaudited Unaudited Audited
as at as at as at
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
ASSETS
Non-current assets 472 266 375 394 409 485
Property, plant and equipment 180 184 127 246 163 115
– Land and buildings 91 217 78 047 86 140
– Other 88 967 49 199 76 975
Goodwill and other intangible
assets 263 252 226 139 226 182
Investment in associate 11 153 8 967 10 491
Deferred taxation 17 677 13 042 9 697
Current assets 1 527 727 1 076 227 1 282 644
Inventories 738 322 630 582 667 983
Trade and other receivables 512 018 274 591 392 259
Amounts due from contract
customers 243 936 155 434 158 651
Taxation receivable 2 126 590 447
Bank and cash balances 31 325 15 030 63 304
Total assets 1 999 993 1 451 621 1 692 129
EQUITY AND LIABILITIES
Capital and reserves 1 035 322 862 206 958 467
Share capital and premium 501 494 501 494 501 494
Non-distributable reserves (177 585) (178 522) (178 316)
Accumulated profits 711 992 539 234 635 289
Equity attributable to equity
holders of the parent 1 035 901 862 206 958 467
Non-controlling interests (579) – –
Non-current liabilities 336 698 162 936 260 266
Interest-bearing liabilities 335 671 161 179 259 411
Vendor loans payable 182 1 169 –
Deferred taxation 845 588 855
Current liabilities 627 973 426 479 473 396
Interest-bearing liabilities 81 240 4 310 26 104
Vendor loans payable 4 181 853 1 278
Trade and other payables 438 262 287 906 343 671
Amounts due to contract customers 12 776 – 8 246
Provisions 20 577 20 147 20 787
Taxation payable 1 454 43 654 1 060
Shareholders for dividends 35 563 40
Bank overdraft 69 448 69 046 72 210
Total equity and liabilities 1 999 993 1 451 621 1 692 129
Supplementary information:
Net asset value per share (cents) 341,31 284,08 315,80
Net tangible asset value
per share (cents) 254,44 209,37 241,12
Number of shares in issue 303 505 691 303 505 691 303 505 691
Abridged consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
Revenue 1 083 441 1 125 748 1 996 053
Profit before interest, taxation,
depreciation and amortisation
("EBITDA") 123 778 198 157 348 282
Depreciation (7 086) (8 202) (11 331)
Amortisation of intangibles (279) (279) (557)
Profit before interest and taxation
("PBIT") 116 413 189 676 336 394
Interest received 3 978 413 5 994
Interest paid (14 084) (10 983) (27 853)
Share of losses from associate (386) (417) (1 666)
Net profit before taxation ("PBT") 105 921 178 689 312 869
Taxation (29 797) (49 898) (88 023)
Net profit after taxation ("PAT") 76 124 128 791 224 846
Other comprehensive income:
Foreign currency translation
reserve 731 385 591
Total comprehensive income
for the period 76 855 129 176 225 437
Attributable to:
Equity holders of the parent 76 703 129 270 225 325
Non-controlling interests (579) (479) (479)
Net profit after taxation 76 124 128 791 224 846
Attributable to:
Equity holders of the parent 77 434 129 655 225 916
Non-controlling interests (579) (479) (479)
Total comprehensive income
for the period 76 855 129 176 225 437
Supplementary information:
Basic earnings per share (cents) 25,27 42,59 74,24
Headline earnings
per share (cents) 25,09 42,46 74,00
Weighted average number
of shares in issue 303 505 691 303 505 691 303 505 691
* Ellies has no dilutionary instruments in issue.
Reconciliation of basic earnings and headline earnings
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
Net profit for the period attributable
to equity holders of the parent 76 703 129 270 225 325
Adjusted for:
Profit on sale of property, plant
and equipment (754) (379) (120)
Profit on change of control from
subsidiary to associate – (120) (857)
Tax effect on adjustments 211 106 240
Headline earnings attributable
to ordinary shareholders 76 160 128 877 224 588
Abridged consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
Cash flows from operating activities (131 910) 32 958 445
Cash (utilised by)/generated from
operations (89 980) 97 236 153 428
Interest received 3 978 413 5 994
Interest paid (13 996) (10 903) (27 713)
Taxation paid (31 907) (23 812) (100 765)
Dividends paid (5) (29 976) (30 499)
Cash flows from investing activities (30 891) (35 911) (77 529)
Cash flows from financing activities 130 954 (8 851) 110 390
Net (decrease)/increase in cash
and cash equivalents (31 847) (11 804) 33 306
Cash and cash equivalents
at the beginning of the period (8 906) (42 212) (42 212)
Cash and cash equivalents acquired
as part of business combination 2 630 – –
Cash and cash equivalents at the
end of the period (38 123) (54 016) (8 906)
Abridged consolidated statement of changes in equity
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
Balances at the beginning
of the period 958 467 760 450 760 450
Total comprehensive income
for the period 76 855 129 176 225 437
Change of control from subsidiary
to associate – 2 931 2 931
Dividends declared – (30 351) (30 351)
Balances at the end of the period 1 035 322 862 206 958 467
Segmental analysis
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 October 31 October 30 April
2013 2012 2013
R'000 R'000 R'000
Revenue 1 083 441 1 125 748 1 996 053
Consumer goods and services 677 438 749 848 1 301 030
– Total 677 438 749 848 1 308 065
– Inter-segment – – (7 035)
Infrastructure 406 003 368 799 687 922
– Total 406 003 368 799 688 382
– Inter-segment – – (460)
Property division – – –
– Total 4 812 3 861 8 483
– Inter-segment (4 812) (3 861) (8 483)
Other – 7 101 7 101
Segmental profits/(losses)
from operations
Net profit before interest and
taxation 116 027 189 259 334 728
Consumer goods and services 65 765 127 759 249 298
Infrastructure 47 203 60 239 82 112
Property division 3 767 3 034 6 790
Other (386) (1 461) (2 710)
Holding company/consolidation (322) (312) (762)
Interest received 3 978 413 5 994
Interest paid (14 084) (10 983) (27 853)
Operating segments (combined) (10 281) (8 655) (22 804)
Property division (3 715) (2 248) (4 909)
Deemed vendor interest (88) (80) (140)
Net profit before taxation 105 921 178 689 312 869
Business combinations
On 1 May 2013, Ellies, through a wholly-owned subsidiary, acquired 100% of the shares and loans
of Botjheng Water (Pty) Ltd ("Botjheng Water"). The purchase price of R10 million was settled via a
cash payment of R7 million on this date and the balance over a 12-month period.
A summary of the provisional fair values of assets, liabilities and purchase consideration is as
follows:
R'000
Property, plant and equipment 785
Deferred taxation (asset) 7 165
Inventories 35
Trade and other receivables 11 796
Bank and cash 2 630
Interest-bearing liabilities (573)
Trade and other payables (48 708)
Total net liabilities acquired (26 870)
Purchase consideration discharged as follows: 9 866
– Cash payments made on effective date 7 000
– Deferred payment due in the future 2 866
Cash payments made on costs of business combination 446
Goodwill 37 182
In terms of IFRS 3: Business Combinations, Ellies has a maximum of 12 months from the acquisition date
to complete the acquisition accounting of Botjheng Water. The allocation of the purchase consideration to
the identifiable assets and subsequent amendment to the recorded goodwill will therefore be reported at
the year ending 30 April 2014 and retrospectively applied for the six months ended 31 October 2013.
Notes to the unaudited interim results
Basis of preparation and accounting policies
The unaudited interim results for the six months ended 31 October 2013 have been prepared in
accordance with International Financial Reporting Standards ("IFRS"), and comply with IAS 34 – Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Board
or its successor, the requirements of the Companies Act, No. 71 of 2008 of South Africa and the Listings
Requirements of the JSE Limited. The accounting policies used in the preparation of the unaudited interim
results for the six months ended 31 October 2013, are consistent with those applied in the audited
financial statements for the year ended 30 April 2013. These results have been compiled under the
supervision of the Chief Financial Officer, MF Levitt CA (SA). The interim results have not been reviewed or
reported on by the group auditors, Grant Thornton (Jhb) Inc.
Change in presentation
As referred to in the 30 April 2013 results, in order to improve on the group's disclosure, the receivables
accounted for under Construction contracts have been moved out of "Trade and other receivables" and
placed under "Amounts due from Contract customers". The effect on the 31 October 2012 interim results
is to reduce "Trade and other receivables" by R155,4 million. There is no effect on any statements of
financial position prior to 2012, as there were no amounts relating to Construction contracts.
Commentary
Introduction
Ellies Holdings Limited ("Ellies" or the "group") is a leading South African manufacturer, wholesaler,
importer and distributor in diversified sectors servicing the local and African markets. Operational
divisions comprise consumer and commercial goods and services, renewable energy, power
management, water and telecommunications infrastructure.
Overview
The period under review has been challenging for the group. During the prior period, the group enjoyed
the majority of the benefits derived from the Eskom consumer programme. This contributed substantially
to the group's prior period comparative growth in EPS from 21 cents to 43 cents and is now reflected in
the comparative negative movement to the current 25 cents per share. Notwithstanding this, the core
business of the group, excluding the Eskom impact, achieved satisfactory growth in revenue, albeit at
a 3% drop in gross margin.
Notwithstanding the current difficult trading conditions in the Ellies consumer goods and services
segment, it still achieved core business growth at the lower margin.
Consumer revenue for the first half of 2013 (excluding Eskom) was R520 million being core revenue.
The comparative core revenue (excluding Eskom and OpenView HD ("OVHD")) for the first half of 2014 grew
by around 20%. The lower margins were necessitated as a result of market conditions and currency impact.
The Infrastructure division for the first half of the 2014 period increased revenue by 10%, largely due
to the acquisition of Botjheng Water which did not achieve an operating profit during this initial stage.
The Infrastructure division thus reflected a decline in PBIT of 22% from R60,2 million to R47,2 million,
after incorporating the R1 million loss from Botjheng Water. This however is an improvement on this
division's immediate preceding six months of R21,9 million.
The group's statement of financial position remains solid, with NAV and NTAV per share improving to
341 cents (2012: 284 cents) and 254 cents (2012: 209 cents) respectively.
The total interest-bearing bank debt, which includes property term finance, results in a debt to equity
ratio of 40% as compared to 31% at April 2013. With the exclusion of the property funding, which replaces
rent with interest, this ratio drops to 33% as compared to 24% at April 2013. The higher inventory holding
in anticipation of future opportunities, including Digital Terrestrial Television ("DTT") and OVHD, together
with work-in-progress and longer cycle contract customers, impacted on these ratios. The group's
interest cover to EBITDA is 12,25 times (2012: 18,75 times). Management's objective is the achievement
of a 25% gearing level, excluding any property financing, and believes that the current higher ratio is
short-term.
The cash flows from operating activities declined by R132 million as a result of the working capital
requirements to roll out the OVHD programme. A R150 million two year facility was raised to fund this.
Prospects
The group's diversification into new products and ventures together with its alignments with leading
technology partners, enables the group to build on its existing skills, infrastructure and customer base.
Management believes that the current difficult trading conditions will continue. We endeavour to leverage
off our existing core competencies, our capacity and customer base.
The Consumer goods and services division
The DTT migration rollout in South Africa is keenly anticipated in the short term. New production machinery
has been installed for increased local production and employment. In the interim we continue to export DTT
products into Africa.
OVHD, a free to view satellite broadcaster, was launched in October 2013. This late launch and stock
placement into the retail market failed to take full advantage of the festive period. The roll out is expected to
gain traction in the coming months.
Sales of Multchoice's DStv remain constant and it is anticipated to maintain its share in the entertainment
market.
Ellies is well positioned to participate in and benefit from all aspects of the growth in the domestic TV
entertainment and connectivity demand across all population groups. The Ellies Connect concept has
been established to consolidate and facilitate the marketing of various vendor offerings.
The group's initiatives in energy conservation continue to attract new and innovative renewable energy
products and ideas. The expansion into commercial efficient lighting and energy generation continues
to attract interest. Management anticipates that this business-to-business sector will see significant
future opportunities.
Infrastructure division
The contribution of the Infrastructure division remains important to the group, consistently contributing
approximately one third of the group's profits and offering diversification in both product and customer base.
Megatron Federal has been re-certified as ISO-compliant for the company's quality control systems.
It is working towards an integrated certification which will incorporate the environmental and health and
safety ISO certifications. Increased compliance with the ISO standards will drive sales particularly in the
mining sector. This will contribute to greater operational efficiencies.
Power products manufacturing sector
This sector's historical investment in capital equipment and standards testing continues to yield greater
volumes and efficiencies with a consistent revenue contribution.
Success has been achieved in engaging with numerous developers for a number of sites in the South African
Renewable Energy Independent Power Producer's ("REIPP") programme, through the specially-developed
Transformer Compact Substation. The first operating solar plant has being installed using this technology.
The miniature substation manufacturing operation has experienced growth following the successful
product type-testing and certification. It remains a key product within the sector.
Likewise, the transformer manufacturing operation is experiencing growth with increased exports to both
Mozambique and Namibia in particular.
The prospects for this sector remain positive. A healthy order book for the coming period together with
yet more REIPPP projects is expected.
Infrastructure projects sector
During the first six months of the period, this sector showed a strong performance. Engagement in
additional geographical and commercial markets as well as expansion into our traditional markets,
contributed to an increase in revenue for the sector. The addition of Botjheng Water to the portfolio
will allow access to new markets for both Botjheng Water's traditional business, as well as adding
complementary services to Megatron's power offerings.
Work continues on our mining-based projects in Africa, with the DRC, Ghana and the Republic of Congo
remaining key.
Exports continue to represent the largest portion of the revenues generated by this sector. Our track
record and experience in Africa, continue to bolster confidence in our company. The company's reputation
positions it to benefit from the anticipated growth in infrastructure development in Africa, with solid
opportunities in numerous markets.
The construction and renewables divisions will be commencing new projects in 2014 with good growth
prospects.
Telecommunications projects sector
Telecommunications performed in line with expectations for the period under review.
49% of the Towers business unit was sold to allow for a broad-based ownership structure. Growth in both
revenue and earnings is expected.
Within South Africa, there is a growing trend amongst telecoms operators to secure electricity supply
to meet their stringent up-time requirements, whilst investing in long-term strategies to mitigate rising
energy costs. Our key products of "green" sites and the Integrated Power System continue to represent
the largest growth within the business unit. As the uptake of the technology increases we are well placed
to capitalise on this trend.
Strategic investments
The group is always engaged with exciting prospects for organic growth, new ventures and product
opportunities. Currently, alliances and investments are being investigated for the expansion of renewable
energy products, skills and resources. This would further enable growth of the group's commercial
offerings into renewable energy projects.
The group's investment in SkyeVine has begun to reflect improvements. It is anticipated that these
positive signs will continue.
Dividend policy
The dividend policy will be reviewed periodically taking into account prevailing circumstances and future
cash requirements. At present and in view of the prospects, all cash generated by the company will be
utilised to fund new opportunities. Accordingly, no interim dividend is proposed at this stage.
Appreciation
The directors and management once again continue to recognise and appreciate the focused efforts and
hard work of the group's staff and also continue to appreciate its customers, business partners, advisors,
suppliers and, most importantly, shareholders.
By order of the board
ER Salkow WMG Samson
Chairman CEO
21 January 2014
Executive Directors
ER Salkow (Chairman)
WMG Samson (Chief executive officer)
MF Levitt (Chief financial officer)
RH Berkman
RE Otto
Non-executive Directors
AC Brooking
MR Goodford
Lead independent non-executive Director
OD Fortuin
Independent non-executive Directors
FS Mkhize
M Moodley
Registered office:
94 Eloff Street Ext, Village Deep
Johannesburg, 2001
(PO Box 57076, Springfield, 2137)
Sponsor: Java Capital
Company secretary:
Probity Business Services
(Pty) Ltd
Transfer secretaries:
Link Market Services
South Africa (Pty) Ltd
www.elliesholdings.com
Date: 21/01/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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